Stimulus and now made too much

[katb]

What happens if you received all the stimulus payments in  2021 based on past income (2020), but now in 2021 you have made over $150K?
I am worried we are going to owe.  In 2020, we made about $25K less.  But in 2021, my hours have increased and received a $10 an hour payraise.  I still work part time (20 hours a week).  However during the spring I was teaching virtual full time (30 hours a week).  Husband got a raise and a cost of living increase.  All these things increased our pay which I think will put us over that initial threshhold.  3 kids at home, but 2 turn 17 this year.  

Damn, anything I can do now in the next 6 weeks or just put $$ away and be prepared?

[niq]

Do you or your husband have pre-tax retirement plans you can contribute to? Those are above the line adjustments to income. Other than that you could temporarily up your tax withholding, if you can manage it in terms of cash flow.

[puppylove64]

So the credit is based on your AGI, which is your income less your pretax 401k contributions. So check if your are still over $150k. You can easily change your 401k contributions between now and year end if you aren’t already maxed out.

[savan]

My understanding was that if they underpaid your stimulus, you receive the amount owed when you filed. If you overpaid, like you fear you did, they would excuse it and you wouldn’t owe anything.*

*Not a tax expert

Edit:   I tried googling and now I’m not sure.  It does sound like you might need to return the 3rd stimulus at least.  

[sadlebred]

Make lots of donations to charity? Might be the best way. Probably talking at least a few thousand to offset some of the extra income. I'd personally put away some extra money instead after making my usual charity donations.

[wanderingback]

Oh interesting, this never crossed my mind as being a problem.
I make I think about 3 times more in 2021 than I did in 2020 and definitely over $150k.
I thought the stimulus was based on 2019 or 2020 income, why would they now look at 2021 to say now you don't qualify?

[puppylove64]

wanderingback the prepayments are the child tax credit. You will have to true up when you file your 2021 tax return in April 2022. They are not actually stimulus money. It is to help families have regular money monthly rather than a large refund in April

[scout8]

Maybe I'm misunderstanding your question, but I don't think that you will have to pay back the stimulus payment due to an income increase.

www.irs.gov/newsroom/questions-and-answers-about-the-third-economic-impact-payment-topic-h-reconciling-on-your-2021-tax-return

[katb]

Nov 21, 2021 7:27:48 GMT -5 scout8 said:

Maybe I'm misunderstanding your question, but I don't think that you will have to pay back the stimulus payment due to an income increase.

www.irs.gov/newsroom/questions-and-answers-about-the-third-economic-impact-payment-topic-h-reconciling-on-your-2021-tax-return

Thank you, that does seem to imply I will not.  I am quite worried as we have never made this much money in years past.  The pandemic actually increased my income by almost double because of virtual teaching and being home all the time with my kids, I had time to teach every day.   Add in a raise we didn't know was coming for myself and my husband.  

As far as 401, we don't have one.  My husband works for a union and is part of the international chapter, so he has two defined benefit pensions.  I am a part time teacher and am considered a temporary contractual employee (my employement from year to year is not guaranteed, it's based on funding and if a building is available for our program).  We have discussed opening a Roth or something for myself.  I think this is the year we are going to do it.  

[niq]

Nov 20, 2021 20:56:51 GMT -5 puppylove64 said:

So the credit is based on your AGI, which is your income less your pretax 401k contributions. So check if your are still over $150k. You can easily change your 401k contributions between now and year end if you aren’t already maxed out.

Would contributing to a traditional IRA also lower AGI?

[niq]

Nov 21, 2021 10:16:45 GMT -5 katb said:

Nov 21, 2021 7:27:48 GMT -5 scout8 said:

Maybe I'm misunderstanding your question, but I don't think that you will have to pay back the stimulus payment due to an income increase.

www.irs.gov/newsroom/questions-and-answers-about-the-third-economic-impact-payment-topic-h-reconciling-on-your-2021-tax-return

Thank you, that does seem to imply I will not.  I am quite worried as we have never made this much money in years past.

It looks like the IRS is only going to claw back Advance Child Tax Credit (the monthly payments), not the one-time $1400. (what puppylove64 said, more or less). But I *think* the monthly payments are based on your total CTC amount, not the 2021 increase, and the total CTC phases out super duper slowly.



www.taxpolicycenter.org/taxvox/child-tax-credit-grows-lift-millions-children-out-poverty

Basically unless your income changed from under $150K to like $250K or $300K, you might get a smaller refund but you should be okay?

[wanderingback]

Nov 21, 2021 6:50:22 GMT -5 puppylove64 said:

wanderingback the prepayments are the child tax credit. You will have to true up when you file your 2021 tax return in April 2022. They are not actually stimulus money. It is to help families have regular money monthly rather than a large refund in April

I did not see the word child in the original post!
My apologies.
I do not have children so I assume this doesn't apply.
I thought they were talking about the pandemic stimulus, but I guess not!

[wanderingback]

Ok there seems to be confusion! Is OP talking about the child tax credit or the economic stimulus due to the pandemic? I thought they were talking about the economic stimulus due to the pandemic since I didn't see the words child tax credit mentioned. Either way if ti's talking about the economic stimulus due to the pandemic I thought it was determined that it was from 2019 and 2020 income, so 2021 has nothing to do with having to pay it back. I know nothing about the child tax credit since I don't have children.

[puppylove64]

Sorry wanderingback I assumed child tax credit because it phased out at $150k. You are right I don’t know what op is talking about either

[scout8]

And just to cause more confusion, I was talking about the stimulus payments, not the CTC.

[purplepenguin7]

The Covid stimulus does not have to be paid back regardless of increasing income. The Advanced Child Care Monthly payments DO need to be “paid back” because they are just an advance on the tax credit you get when filing. So if you your income went up significantly and you are eligible for a smaller credit, you can essentially end up negative, or paying some back. However because the advance is only half on the amount, it is my understanding that most people will not have to pay anything back unless you like doubled your income this year, you will just receive less on the back half (or nothing depending on just how much your income went up).

If I were you, I would 1) save your last monthly deposit just in case (if you are able, December is probably the hardest month to skip). And 2) try your best to hand calculate your new AGI. If you are just slightly over the $150, I would add to your pre-tax retirement accounts, if you have, or donate to charity to get under the threshold.

[wanderingback]

katb, can you come in to clarify if your'e talking about the child tax credit or the economic stimulus due to the pandemic? You didn't mention the child tax credit in your OP, but some people seem to be mentioning that, so wanted to clarify!

[katb]

Nov 21, 2021 17:07:46 GMT -5 wanderingback said:

katb , can you come in to clarify if your'e talking about the child tax credit or the economic stimulus due to the pandemic? You didn't mention the child tax credit in your OP, but some people seem to be mentioning that, so wanted to clarify!

I am talking about the economic stimulus due to the pandemic.  I will read the replies above and respond too.

[niq]

oh man are we going to do marginal tax rates vs effective tax rates next?